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A lack of will or a willful strategy?

Competition law specialist Frank Fine says a European Commission decision to suspend its own case against Microsoft is a mistake it may soon regret.

The ongoing conflict between the European Commission and Microsoft took a bizarre turn on June 25. That's when the Commission decided on its own to temporarily suspend its March 24 decision ordering Microsoft to offer Windows without Media Player and share its proprietary interface information with competitors in the low-end server software market. The Commission imposed these remedies to cure Microsoft's abuse of dominant position under Article 82 of the European Commission Treaty.

This self-imposed stay will remain in force until Judge Bo Vesterdorf, the president of the European Commission Court of First Instance, decides whether to grant Microsoft's application for a permanent stay of the March 24 decision.

A Commission spokesperson later said that the unusual gesture was intended to facilitate the "proper administration of justice." In truth, however, the Commission's real concern was to avoid a replay of the stay proceedings in NDC/IMS.

NDC/IMS was a landmark Commission decision, which involved a false claim of copyright by IMS in a German industry standard (which consisted of a map of Germany partitioned by single and aggregated postal codes) in order to prevent its competitors, such as NDC, from providing similar pharmaceutical information services. The Commission held, under Article 82, that even if IMS held a valid copyright in the standard, it could not refuse to license its intellectual property to competitors.

There is more at stake here for the Commission than saving face.
In the IMS case, Judge Vesterdorf's antipathy toward compulsory licensing was in plain view. The judge concluded that the risks to IMS in having its "copyright" jeopardized were greater than those suffered by NDC et al. in not having access to the German industry standard. He then took the rare step of issuing an ex parte interim order (for example, without providing the Commission or NDC the courtesy of a hearing), staying the execution of the Commission's imposed license on IMS. For good measure, he subsequently imposed a permanent stay after having heard the arguments of the parties.

Fast forward to July 2004. A stay by Judge Vesterdorf in the Microsoft case would only continue the Commission's inaction. Unfortunately, there is more at stake here for the Commission than saving face.

The Commission set its deadlines for the unbundling of Media Player and the disclosure of interface information knowing that Microsoft would seek to stay each remedy imposed by the decision. The effect of the Commission's self-imposed stay had the immediate effect of waiving the June 28 deadline for Microsoft to unbundle Media Player. This raises the question of why the Commission set the 90-day deadline in the first place.

It does not bode well when the Commission begins dismantling its own decision before the forthcoming interlocutory and main proceedings. There is a real danger that both Judge Vesterdorf and Microsoft will exploit the Commission's faux pas to show that the entire case is seriously flawed.

There is a real danger that both Judge Vesterdorf and Microsoft will exploit the Commission's faux pas to show that the Commission's entire case is seriously flawed.
By having acted preemptively, the Commission has arguably undermined established European Commission Court rules, which impose on Microsoft the burden of proving that the implementation of the Commission's decision would cause it serious and irreparable harm. To the extent that the Commission has refused to fully execute its own decision, it has relaxed, to an equal degree, Microsoft's burden of proof.

More fundamentally, the Commission can ill-afford to concede ground to the president of the Court of First Instance in stay proceedings. This is because the only appeal from a stay by Judge Vesterdorf would be to the president of the European Court of Justice, whose power to undo the stay is extremely limited.

In effect, if Microsoft persuades the Court of First Instance president to grant a stay, it is highly likely to continue in force until the European Court of Justice has ruled on the substance--and that might be five to six years from now. This is not exactly in the interests of the "proper administration of justice," particularly when a stay would allow Microsoft to marginalize or destroy its competitors before its case reaches the highest European Commission court.

The ultimate irony is that the Commission holds an ace that it did not possess when Judge Vesterdorf stayed the Commission's decision in IMS.

On April 29, in a preliminary reference from the German court hearing IMS's copyright infringement case against NDC, the European Court of Justice affirmed the crucial substantive elements underlying the Commission's IMS decision. This ruling should greatly restrict Judge Vesterdorf's latitude to stay the order that Microsoft disclose its interface information. And this issue of disclosure is the most difficult issue facing the Commission in the appellate proceedings.